Growing Indo-American Business Relationship

India has important and strong economic relations with many countries in the world. Traditionally India has maintained trade relations with various countries. After the economic reforms of the early nineties, the Indian economy was opened up to further bilateral trade relations with various countries and to Foreign Direct Investment (FDI). Import restrictions on many items were lifted which led to expansion of India's economic relations with other nations.

Some of the countries with which India has strong economic relations are -

  United States of America

  United Kingdom

  Japan

  China

  Germany

  Canada

  Switzerland

  Italy

India's Economic Relations with US

India's economic relations with the United States of America have grown since the economic reforms. However, today world’s largest democracy and oldest democracy, Indo-US, are natural partners and share chief interests in trading. The shared interests and fundamental democratic values of these economies have facilitated their trade dealings. Regardless of the fact that USA is India’s major trading partner, India ranks 18th in US imports and 24th in US exports.

About the investment sector of these economies, United States is India’s second largest source of Foreign Domestic Investment accounting to 16 percent investment flows to the Indian economy. With its investments, US has covered every sector in the Indian economy including IT, infrastructure, Energy, Telecom sector, pharmaceuticals and biotechnology that hold immense potential for boosting the economic cooperation between the two economies.

The major export items from India to the United States include -

  Fish

  Seafood

  Precious stones

  Textile products

  Apparels

  Metals

  Machinery

  Organic Chemicals

  Iron and steel products

The major import items to India from the United States include -

  Medical and surgical equipments

  Computers and computer parts

  Gas turbines

  Telecom

  Electrical Machinery

  Plastic

  Cotton
  Wooden pulp

The economic slowdown has bottomed out and the U.S. Economy is showing signs of a recovery, although the pace is slow. The Policy change and the measures adopted by the President Barack Obama’s Government has yielded results faster than expected and overall there is an upward trend.

In India the growth rate which crossed a high of 9% in the past, slowed down during the Global meltdown. Indian domestic market was not so severely effected. The major effect was felt in the export sector and the export based Industry, which fell by over 30%. The financial sector which was the most effected, largely due to the disinvestment of the FDI, has also shown good recovery, with the sensex rising up and crossing the 17000 Mark, again due to the inflow of the FDI. Due to the lowering down of the term deposits rates by the Banks, the liquidity in the market is good and is to be tapped properly.

Today, US-India relationship has transformed fundamentally from one of Cold War mistrust to really strategic partnership.

In education sector, over 1,00,000 Indian students are attending U.S. colleges and universities. About 78 per cent of the total enrolments were for postgraduate studies and over 18 per cent were for undergraduate programmes. Indian students occupied first or second positions in foreign student enrolments at masters, doctoral, and research institutions. Higher education was one of the brightest areas of people-to-people contact between U.S. and India. Educated Indian Americans have become the forerunners of the U.S. economy and have made their contribution in fields such as technology, science, medicine and arts.

In recent years, India was second only to Germany as the country of choice for American scholars seeking Fulbright grants to study overseas.


A very important aspect of US India economic relations comes with the emergence of Business Process Outsourcing, where in many US companies are reaping the advantages offered by India's IT sector. India offers a large pool of trained, English speaking personnel, which offers huge cost benefits to the US MNCs.

Several big names like, American Express, Citicorp, Microsoft, Dell, Hewlett-Packard, HSBC, Standard Chartered and Convergys etc are taking advantage of the opportunities offered by India's IT Sector. Other Fortune 500 companies such as Morgan Stanley, AT&T, Reebok, GM, Fujitsu, Boeing, Pepsi, Swissair, Coca-Cola and British Airways have identified India as their outsourcing partner. Many more corporations across the globe are following suit.
However, a number of factors continue to hamper economic ties between the two countries. US criticizes India for maintaining high tariff rates on imports (especially on products that compete with domestic products), and levying high surcharges and taxes on a variety of imports and imposing non-tariff barriers on US exports to India.

In order to capture more US investment and trade share, India is required to further relax its trade and investment regimes, accelerate privatization of state firms, cut down on corruption, and substantially boost spending on its in physical and human infrastructure. For this significant steps are required to eliminate government deficits and the high level of public debt that severely hamper the ability of the government to boost spending for needed infrastructure projects.


Recently, the US India Business Council (USIBC), along with FICCI, has launched a Knowledge Trade Initiative (KTI). KTI aims to strengthen Indo-US leadership in the knowledge economy by harmonizing bilateral positions on key issues affecting knowledge trade. This is expected to provide a fillip to Indo-US relation further. Thus, given the comparative advantages of the two countries, there is a tremendous scope for further strengthening the business ties between the two countries in this sphere.